A Primer on Corporate Governance, Second Edition

Chapter 1

Corporate Governance: The Link Between Corporations and Society

The U.S. Corporate Governance System

Today’s U.S. corporate governance system is best understood as the set of fiduciary and managerial responsibilities that binds a company’s management, shareholders, and the board within a larger, societal context defined by legal, regulatory, competitive, economic, democratic, ethical, and other societal forces (Figure 1-1).

Figure 1-1. The U.S. corporate governance “system”.

Shareholders

Although shareholders own corporations, they usually do not run them. They elect directors, who appoint managers who, in turn, run corporations. ...